A Study Of Information Asymmetry On Software Industry

With the persistent development of market economic, the uncertainty and risk improves when the product"producing, distribution, exchange and consuming."The effort of information becomes more and more fundamental as an important resource in our society's economic activities. After World War Two, many economists began to take economic analysis on the information factor and its influence in economic activities, not only on amending and complementing traditional economic theories, but also on existing economic theory and ways in analyzing society information and information activity of economic mechanism and orderliness.As we know, software is the key part of information technology, plays a serious role in many areas, software industry is a knowledge- centralization, intelligence-centralization and innovation-centralization highly technology industry , it is a critical standard in evaluating a nation's modernization level and its ability in self reliance and renovation. As a"pollution free, low energy consumption and highly employment"industry, software industry not only can improve the nations wholly economic operation efficient, using information technology promotes and reform traditional industry, but also may form a large shape which can advance economy . Therefore, software industry takes an important strategic role in every nation's economic development.As a new popular highly technology industry, software industry and software product faced lots of problems during its developing period because of its special character and outside environment, especially on information asymmetry. Software developing needs large amount of cash, and the main way of industry to search initial fund is to get venture capital, during financing period, if software management want to sign the contract with investor, both sides need to exchange necessary information, but for some reason, one of them want to get finance, software management may choose to hide its unfavorable situation or provide false information, and this kind of way called information asymmetry. In software market, developer knows more about its product than consumers, but they are lack of consumers'needs information, consumer knows little about the cost of a software and also face developers'hazard problem, these are all called information asymmetry. This situation not only may raise the trading cost, but also may break the market operating rules, reduce the efficient of market, and finally impede the development of software. This dissertation put information asymmetry as a point of penetration, making a analysis on software industry financing and the problem of information asymmetry in software product market, making a detailed research in its existing reasons and influence, and provides some suggestions on adverse selection and moral hazard problems which information caused, this reflect a important reality.This paper includes five parts:The first section states the background and meaning in which analyzing software industry and its relating question by using information asymmetry.The second part mainly introduces the basic theory of information asymmetry, which includes the meaning and categories of information asymmetry, and it's the principal-agent theory, and analyzes that the reason why the information asymmetry forms: which is the higher division of society work and the more professional it is. In the last part of this section, it analyzes two problems"moral hazard and adverse selection"that causes by information asymmetry and two ways to amend this problem: signal transmission and signal screening.The third part accords to the development of software industry in present situation, based on the information asymmetry theory to analyze the software industry's difficulty in financing in capital market. Firstly, it analyzing the reason why information asymmetry appears when software industry finances, it mainly because investor can not confirm the fair value of industry by asset valuating, the management of industry sometimes publishes false information or even hide the truth, industry emits the failure signal, the investor lacks of necessary knowledge and experiences and the high cost of searching information; moreover, it gets a important conclusion by founding a adverse selection model in venture capital market: in venture capital market, it necessarily results in adverse selection if it contains information asymmetry between investor and industry management, this situation may reduce the venture capital market's operating efficiency, making industry finance harder. At the end of this part, it points that if we want to improve our software industry's financing environment, we can use these ways: enlarging the government's putting energy in innovation project, founding a sponsor fund for software debt, improving laws to ensure investors'legitimate rights, adjusting the mainly structure and raising the financing ways, building a excellent credit system, enhance industry's regulation level and regulating agency.This passage focuses on software trading market's information asymmetry, in traditional trading market, there contains information asymmetry between producer and consumer, producer always stands in definite information advantage, but as a information commodity, it has more specific factors than common products, this makes information asymmetry more complicated between developer and consumer, specially in both face some information losing.This text firstly states the reason that software developer lacks of consumers'needing information by analyzing professional software and common software, this information asymmetry makes developer face huge market risk. Then, it analyzes software consumers'lacking of information problem, this includes that consumer can not understand the real quality of software and lack of cost information. The former one would cause consumers adverse selection, and raise their search information cost, the latter not only hurt consumer's advantage but also an important reason that pirate exists. Moreover, it focus on that consumer may face developer's moral hazard after buying software. The information asymmetry in software market in very complicated, also caused serious situations, therefore, this passage provides some suggestions on how to lower the information asymmetry.The fifth part: Make a conclusion for the whole passage, and finds some deficiency.